Irish Ucits funds industry booming despite Chile concerns

Latest net sales figures from the European Fund and Asset Management Association suggest Ireland has succeeded in its chase to take the largest share of the Ucits investment pie so far in 2011.

In total Irish Ucits experienced net inflows of €39bn in the first six months of 2011. This is €7bn more than net inflows into Luxembourg Ucits, the next closest domicile.

The Irish Funds Industry Association (IFIA) says the growth of the Irish Ucits funds industry is stronger than in any other domicile. According to the IFIA, over the past 10 years the net assets of Irish Ucits have grown by 422%, “an unbeaten track record.”

Gary Palmer (pictured above), chief executive of the IFIA, believes the growth of Ireland’s Ucits funds industry is indicative of “the strength and attractiveness of Irish funds as investment opportunities for investors throughout the world and, in fact, demonstrates that Ireland is the location of choice for Ucits funds.”

Recently though the Chilean pensions regulator, Comisión Clasificadora de Riesgo (CCR), expressed concerns about the Irish Ucits funds industry. The CCR downgraded Irish Ucits funds to restricted investment status in August 2011. This was a reaction to Moody’s lowering Ireland’s credit rating to junk status in July 2011.

Lawyers have suggested the move by the CCR could lead managers to pick rival jurisdictions over Ireland when launching new Ucits, as well as triggering several billions of outflows from Irish Ucits funds if Chilean pensions start reallocating their money.

However, a spokesperson for the IFIA maintained there will be “no forced redemptions” from Chilean pension funds as none of their current investments into Irish Ucits are over the restricted investment limit. The spokesperson added that Chilean pension funds are “increasingly diversified and very aware of what they are investing in.”

Chile first began to question the legal issues surrounding its pension funds investing in Irish Ucits in late 2010. Since then Ireland’s fund industry has demonstrated its immunity to the country’s domestic sovereign debt issues, the IFIA spokesperson said. “If anything our domestic situation has created a more competitive environment with better staff retention and job creation,” the spokesperson added.

State Street is just one investment manager committed to the Irish funds industry. In early 2011 State Street Global Advisors, the investment management business of State Street Corporation, announced its acquisition of Bank of Ireland Asset Management for €57mn.

State Street Global Advisors has also reinforced its Dublin-based fundamental equity team headed by Chris Johns, global chief investment offer, Active Fundamental Equities. The team is to be joined by two senior research analysts, Jeremy James from Pioneer Investments in Dublin and Mark Prentice from Goldman Sachs Asset Management in London.

Although Ireland’s market share of net Ucits assets has now increased to 13% (compared to 11.5% in 2010), it still lags behind France and Luxembourg which have a 20% and 31% market share respectively.

Other domiciles to have experienced significant inflows into Ucits funds include the UK (€13bn), Switzerland (€11bn), Norway (€5bn), Sweden (€3bn), the Netherlands (€2bn) and Denmark (€2bn). France suffered the largest drop in Ucits investment, recording €38bn of outflows.

Despite the total number of Ucits funds growing from 36,559 at December 31 2010 to 36,733 by the end of the second quarter 2011, total net assets invested in them dropped 1.4% or €87bn during the same time period.